[Anonymous]

Hey guys, this particular question is bugging me…. If you can offer an alternative explanation it would be very appreciated!

Either I am missing something here… or this explanation could be wrong for real! Thanks all!

Ok… from Wiley…

Pomplin, an individual calendar-year taxpayer, purchased 100 shares of Trix Corporation common stock for $10,000 on October 10, 2011, and an additional 50 shares of Trix Corporation common stock for $4,000 on December 15, 2011. On November 8, 2011, Pomplin sold the 100 shares purchased on October 10, 2011, for $7,000. What is the amount of Pomplin’s recognized loss for 2011 and what is the basis for his remaining 50 shares of Trix Corporation stock?

Answer: $3,000 recognized loss; $4,000 basis for his remaining stock.

Explanation: This answer is correct because no loss can be deducted on the sale of stock if substantially identical stock is purchased “”””within 30 days before or after the loss sale”””. In this case, Pomplin’s November 8 sale of stock at a loss of $3,000 can be recognized because his purchase of identical stock on December 15 was not within 30 days of his November 8 loss sale. The stock purchased on December 15 has a cost basis of $4,000.

OK… now wait a second…. Pomplin bought the stock on 10/10/2011. He sold on 11/8/2011. It seems to me that this transaction took place WITHIN 30 days???

Shouldn’t this loss be disallowed???

The explanation makes no mention of the original purchase on 10/10/2011… I can’t see how this is NOT a wash sale within 30 days…

I know the 12/15 repurchase is over 30 days and thats ok. Just really confused about the 10/10/2011 purchase and 11/8/2011 sale??

Thanks guys for your help!

[kts1010]

Ok, from what I understand since he did not sell and repurchase within the 30 days before/after original purchase it would not be a wash sale. Correct me if I am wrong but that is how I understand wash sale.

AUD - 08/20/12 - 82
REG - 10/30/12 - 82
FAR - 01/05/13 - 80
BEC - 04/15/13 - 84

[momto5]

@kts1010 – I think you are right. Because the repurchase was made more than 30 days after the sale, it doesn't count as a wash sale.

@cscpa12 – I don't think the sale within 30 days matters by itself. Because the repurchase did not happen within 30 days of the sale, it is like two different transactions. A sale at a loss 29 days after its purchase. Then 37 days after that a repurchase. Period. The loss is allowed – no wash sale. At least that is how I currently see it (but I am just in chapter 2 of REG so far).

FAR - 92 (4/27/12)
AUD - 96 (7/17/12)
BEC - 92 (8/30/12)
REG - 91 (11/12/12)

[Anonymous]

This wouldn't be considered a wash sale because Pomplin didn't have identical shares of stock that he had previously purchased (other than the October 10 purchase). Think of it this way: if you were to buy one share of Apple stock for $660 and sell it the next day for $650, would that be a wash sale? No, not if this was the only Apple stock you had owned. Otherwise, to what would you transfer the unrecognized loss as a basis? On the other hand, if you had bought one share of Apple stock for $680, then later bought another share of Apple stock for $660 and sold it the next day for $650, you WOULD have a wash sale. The $30 loss would be disqualified, and this would increase the basis of the second purchase from $660 to $690.

Basically, if you get rid of everything you have, unless you buy again in the next 30 days, you'll never have to apply wash sale rules.

[Anonymous]

Hey guys, thank you all so much for the replies and clarification. I was overlooking the fact that a “repurchase” typically takes place in a wash sale. It makes sense that if no “repurchase” takes place than you would simply recognize an ordinary loss on the sale.

As CPA pointed out… to what basis would you transfer the unrecognized loss?, if a repurchase had not taken place…

This was a key point to understanding.

Thanks kts, momto5, and CPA. All of your responses were very helpful for me to understand the finer points of these wash sales. I have added all your responses to my notes for review!

[Author]

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